Power Ledger expands trials of blockchain electricity trading

West Australian software developer Power Ledger is currently applying its blockchain-based software in an attempt to open up peer-to-peer (P2P) energy trading behind the meter and across the network.

One short-term trial in WA has just wound up, and two are about to get underway, as the startup works towards delivering a proof of concept for the software solution both to prosumers and utilities.

“It’s the Uber of (insert your own industry)” is the common catch cry associated with many start-ups, even if it a largely inaccurate description of a range of business models. However, blockchain enabled P2P electricity trading might in fact be a case where the description is valid.

A number of startups are attempting to apply variations of the blockchain to facilitate P2P electricity trading. The cloud-based transaction ledger could potentially remove third party margins from P2P electricity trading and allow for households and businesses to access solar electricity from peers on the grid if they have unsuitable roofs for PV or simply lack the resources to install it themselves.

However, clearing the regulatory hurdles slowing the rollout of genuine P2P electricity trading won’t be straightforward and building a track record for blockchain applications in energy will take some time.

“I think that consumers want to become ‘prosumers’ and become citizen utilities and that this is a technology that will enable them to do that,” says Jemma Green, co-founder and chair of Perth-based Power Ledger. Green herself is a prominent West Australian cleantech evangelist and as a former banker, is familiar with the importance of an efficient and trusted trading platform.

Blockchain is a distributed computing accounting protocol that underpins digital currency Bitcoin. Based on miner computers generating a finite number of blockchain tokens, applying the blockchain to decentralized electricity trading could provide the basis for trust between electricity traders unknown to each other through tracking electricity exchanges and transactions.

To trade electricity utilizing the blockchain, communication hardware must be fitted to a standard digital electricity meter that will keep track of electricity being generated, imported or exported. This is then converted into blockchain tokens, which are allocated to various accounts within the network – consumers, producers, and prosumers – as trading takes place between the parties.

The blockchain tokens can then be monetized, either into a standard currency like Australian dollars, or Bitcoins themselves.

By deploying the blockchain in this way, a “cross-referenced and time-specific database” of transactions is generated and stored in the cloud. This database cannot be altered, delivering the trust between the trading parties required to underpin the system.

The system tracks the electrons either fed into or taken off the grid through the principal that they will always seek the path of least resistance.

There are major advantages of the P2P trading model facilitated by the blockchain, particularly as espoused by Power Ledger’s Green. One is that it could potentially provide a model by which distributed generation can be embraced by market incumbents, utilities and network owners, without them losing out as emphatically as could be the case if grid defection gathers momentum.

“The business model of utilities is going through a structural, fundamental shift right now with solar and batteries, and their business models are in structural decline,” says Green. “The disruption is happening but the destruction in value doesn’t have to happen and I believe this could be a good new opportunity that could create new business models [for utilities and grid owners].”

Utilities could play a role in an electricity system in which P2P trading is a major part of the landscape. While ever increasing rates of rooftop PV penetration will decrease gross demand for electricity from the grid generated, distributed and retailed by utilities, there will remain the opportunity for them to facilitate the P2P trading and then supply the electricity shortfall to the P2P community. Utilities could potentially charge a premium for providing service in when shortfalls occur. Grid operators could simply charge a fee for the electrons exchanged over its networks.

Power Ledger hopes to generate revenue through licensing its P2P electricity trading business model and its software, “and taking a small clip on the ticket for each kWh of production to be sold,” says Green.

Regulatory pushback could present a major hurdle for Power Ledger and others in realizing their ambitions. While P2P electricity trading may not be outright forbidden in many electricity markets, distributed energy is seldomly actively facilitated by utilities and incumbents globally have been historically obstructionist in the face of change.

Power Ledger’s Green reports that regulators in New Zealand, by contrast, have been receptive to the Power Ledger offering. Next month Auckland residents will be able to take part in P2P electricity trading via local utility Vector. The company has linked up with Power Ledger to open up the service to 500 sites across New Zealand’s most populous city. Schools, community groups, and residential homes are expected to get involved in the trial, according to a release by Vector.

“This arrangement empowers consumers to better manage and profit from their energy supply and demand,” said Vector chief executive Simon Mackenzie, in a statement. Vector reports that a number of businesses with multiple properties, some of which with rooftop PV, have expressed interest in the scheme. “Why not get the wider benefit across their group as opposed to being site specific?”

Vector also points to the ability for families or communities to share solar generated power across different sites. The electricity could in fact be gifted from one household with solar to another.

Vector itself has been relatively open to the opportunities presented by distributed generation and battery storage, having supplied its SunGenie branded modules to the market since 2013 and installed over 80 Tesla residential batteries to its customers. In December it will install a 1 MW Tesla Powerpack at one of its substations.

While trading across the network is not yet allowed in many utility areas, behind the meter applications represent a smaller but still significant opportunity. Power Ledger has just concluded a trial in Bussleton, south of Perth, that saw electricity traded amongst 10 different households in a retirement village.

Strata properties could also benefit from such P2P energy trading, although as Green notes, the bigger opportunity exists out in ‘gridland’.

“There is a lot of potential for smaller projects,” says Green, “obviously the bigger the scale the bigger the market potential. But it is to show how the technology integrates into the network, from a consumer perspective, it is vital to see demand for bigger projects develop.”

A third Power Ledger trial is set to launch in Fremantle, which will see electricity traded between four apartment buildings across the network. The Perth technology company is expected to announce more details as to this project shortly.

Power Ledger is not alone in attempting to apply blockchain cloud computing to electricity trading. TransActive Grid, a joint venture between LO3 Energy and ConsenSys, is also pursuing the technology. Austria’s Grid Singularity is the major European developer applying the blockchain to the energy space.

WA’s Power Ledger is clearly making some headway in getting trial projects off the ground and P2P trading between households and businesses of solar a reality today, albeit at demonstration phase. The starup is currently fundraising and while based in Perth, Green describes the company’s ambitions as global in nature.

“We have been inundated with queries, literally hundreds of queries,” enthuses Green “The capital raising is to enable us to resource ourselves to be able to respond to those queries and to take advantage of the market opportunities that we see.”